Hoover council votes to raise sales and use taxes, lodging fees

The Hoover City Council voted 4-3 to raise sales and use taxes and lodging room fees on Tuesday, July 10, 2018.

The Hoover City Council tonight voted 4-3 to approve three tax increases that city officials estimate will bring in $11.2 million more in revenue each year but voted down a fourth tax increase that would have generated about $1 million more.

Specifically, the council voted to:

Increase Hoover’s sales tax rate from 3 percent to 3.5 percent, which will put the overall sales tax rate at 8.5 percent in the Shelby County part of Hoover and 9.5 percent in the Jefferson County part of Hoover. This tax increase will go into effect Oct. 1 of this year.

Increase Hoover’s tangible personal property tax from 3 percent to 3.5 percent. Revenue Officer Frank Lopez described this as a companion tax to the sales tax — essentially a tax on leasing items instead of buying them. It also will go into effect Oct. 1.

Create a $2 nightly room fee for lodging facilities in Hoover instead of increasing the city’s lodging tax from 3 percent to 6 percent (or 14 percent to 17 percent including state and county taxes). This room fee, which technically is also a tax, will go into effect Jan. 1.

The increase in sales and tangible personal property taxes together are estimated to generate $10 million more per year for the city, while the $2 nightly room fee is estimated to generate $1.2 million a year, for a total of $11.2 million in additional revenue.

The votes for the tax increases all were 4-3, with council members Casey Middlebrooks, Derrick Murphy, Curt Posey and Gene Smith voting for the tax increases and council members John Greene, John Lyda and Mike Shaw voting against them.

The council also voted 4-3 to reject an increase in residential rental and lease taxes from 1 percent to 2 percent, which city officials projected would have given the city about $1 million more per year. Murphy joined Greene, Lyda and Shaw in voting against the residential rental tax increase, while Middlebrooks, Posey and Smith voted in favor of it.

Tax increase proponents

Posey said nobody wants higher taxes, but city leaders had to find a way to increase revenues to continue providing basic services to a growing population. Hoover now has nearly 90,000 residents and soon will be approaching 100,000 residents, but sales tax revenues, which account for 65 percent of the city’s general fund revenues, actually declined in fiscal 2017 for the first time since the “great recession” of 2008 and 2009.

The city faces increased operating costs and debt service associated with the expansion of the Hoover Metropolitan Complex and additional expenses for public safety personnel, Posey said.

The mayor and council already have made some budget cuts and will continue to make cuts but can’t really borrow more money right now, he said. More revenue is needed to fill the holes in the budget, and the plan approved tonight is the most conservative way to raise taxes when compared to other cities around, he said.

Tonight’s votes were less about political ideology and more about doing the right thing and helping the city take care of “bare bones” needs, Posey said.

The council has an obligation to provide city employees with the tools necessary to take care of residents “and unfortunately, in order to do that today, we’re going to have to ask for more money out of your pocket,” Posey said. “For that, I’m sorry. I wish there was another way, but unfortunately that’s not where we stand right now.

“You just can’t put people’s lives in jeopardy” when public safety issues are on the line, he said.

Murphy agreed. He asked police Chief Nick Derzis and fire Chief Clay Bentley how their departments are being affected by recent budget cuts and what their needs are for the future.

Derzis said his department already is understaffed, with the lowest rates of police officers compared to the public of all the over-the-mountain cities. His department weathered $200,000 in cuts to its operating budget this year, he said. Officers aren’t able to attend some of the training they need, he said.

He asked the council to do what it has to do to get Hoover back to what it used to be.

Bentley said this past year also has been difficult for the Fire Department. Cities such as Birmingham, Mountain Brook, Vestavia Hills and Homewood have about 2.8 or 2.9 firefighters per 1,000 residents, while Hoover has 1.8 firefighters per 1,000 residents, he said.

Hoover firefighters and paramedics do phenomenal work every day, but they are beginning to see some issues and need more resources now, Bentley said.

Particularly, an 11th fire station is needed in southwest Hoover, he said. Signature Homes is committed to build it, but the city has to staff it, and it will cost $1.6 million to run and staff that station, he said.

Council President Gene Smith, a retired Hoover firefighter, said Hoover built its last two fire stations by shifting existing personnel instead of hiring new ones, and the department is stretched thin.

Bentley said it took the department 12 minutes to get to a house struck by lightning recently.

Murphy said approving tax increases was tough to do, but public safety departments are understaffed and the city is no longer filling basic needs. “We can’t keep kicking the can down the road,” he said. “We’ve got to do the things that maintain the top quality of the city.”

The city can’t wait to watch crime infiltrate the city and “play catch-up mode,” Murphy said. “We have to nip things in the bud. … Our police and fire have to have the necessary resources to service our folks.”

Smith said the city’s financial situation has been weighing heavily on him, affecting his sleep.

“I take all this to heart. I don’t enjoy any votes I will cast tonight, and I don’t know that any members, whether voting for or against, are going to enjoy what they’re needing to do tonight,” Smith said. “But those of us here are going to conduct ourselves in what we individually feel is the best thing for our community.”

Dissenters

Shaw said taxes are serious business. “We’re using the power of government to take money from people when we do this, and that’s a big deal,” he said.

It’s OK when taxes are raised to take care of core government services, such as public safety, schools, roads, parks and recreation, libraries, courts and bona fide economic development projects, Shaw said.

But what’s missing here is a detailed list of what the $11 million in new revenue actually will cover, he said. He questioned whether it includes new staffing, a new fire station, sidewalks, roads and things identified in the comprehensive plan under development.

Shaw recommended waiting until the city gets into the budget process this year and then revisit the question of tax increases.

“I have a hard time supporting going to the people of Hoover and taking money out of their pockets, taking money off the table, taking money out of the local economy without knowing detailed line-by-line decisions of what our priorities are.”

Chief Financial Officer Melinda Lopez said city officials can’t really make budget decisions when they don’t know how much funding to expect. Also, the funding challenges facing the city are not a one-year aberration.

Plus, it’s important to remember that $11 million is the minimum the city needs to be able to keep operating as is, she said. It doesn’t address major future capital needs or a new fire station, she said. That’s one reason the mayor requested a full 1 percentage point increase in the sales tax instead of half a percentage point, she said.

“We have to think beyond the fiscal 2019 budget,” Lopez said. “We have to think into the future.”

Greene said that as a fiscal conservative, he is leery of raising taxes.

“I do realize that there are times when there is a compelling need to ask citizens to pay higher taxes in order to maintain reliable and effective public health and safety services,” Greene said. “However, I do not believe that our city is in that situation at this point.”

As the council goes through the budget process with the mayor, he believes they can find ways to work together to live within their means without sacrificing essential services, he said.

Even more important, he has heard from many Hoover residents who share that viewpoint and asked him to vote against any tax increase, he said.

Lyda said he also thinks its unfortunate the council voted on tax increases before going through the budget process to talk about needs and expenses.

He said he deeply regrets that there has been very little interest from the council to talk about expenses and where the city might can save money. “The conversation has been all about the money grab and tax increases.”

While the mayor and his staff have been able to achieve savings in some areas, the city has added $11.6 million in annual spending since this group of elected officials took office in November 2016, Lyda said. “We have made some financial commitments that we cannot afford,” he said.

Only $3 million of that $11.6 million is attributed to the Hoover Metropolitan Complex expansion, which originated with the previous administration, he said. That leaves another $8 million of new annual expenses that this group, including himself, voted to approve, he said.

“We need to take some responsibility and look at correcting those,” he said.

Mayor's response

Mayor Frank Brocato said the City Council stepped up tonight in the face of adversity and recognized that Hoover has some real needs.

“We’re a great city, and we want to remain a great city,” Brocato said. “The citizens deserve a lot, and we want to give them a lot.”

This new revenue will be used to ensure that Hoover remains a first-class city with outstanding police and fire services, parks and a library, he said.

The mayor said city leaders will not treat this new revenue like a pot of gold.

“We’re going to still make sure we budget properly. We’re going to look at real needs as opposed to wants,” he said. “This is not giving us an open checkbook. We will continue to be good stewards of the money we have been given. We will continue to look for efficiencies and make sure we’re doing the things every Fortune 500 company would do in our position.”

Brocato said he didn’t want to raise taxes, “but there’s a reality out there, and we needed to do something. We had to increase our revenue stream or we were going to have take some drastic measures, and I think our council recognized that.”

After the passionate talks by the police and fire chiefs, “I don’t know how you could even vote against it,” the mayor said.

Residential rental tax

Regarding the residential lease and rental tax, Murphy said he voted differently on that tax because he wasn’t fully sold on it.

He was concerned it would be passed along to the people who rent and lease apartments and homes and was particularly concerned about the impact on retired people on fixed incomes, he said. Plus, people in apartments don’t get the benefit of city garbage service, Murphy said.